1. New Atlantic Ventures Sweden-US Entrepreneurial Forum September 2011 #sweus John Backus john@navfund.com @jcbackus

2. NAV “At A Glance” 2 Portfolio company VA/DC/MD (3) New York City (6) (CA & WA) NAV Office Boston (5)  Early Stage Venture Capital  Modest Fund Size: ‒$117m current fund (NAV III)  East Coast Focus  Top Decile Post-2000 Performance  Blue Chip LP Base, 50% from EU  Key Difference: Thesis-Led Investors 19 Companies:

3. Annual US VC fund-raising Volatility over the past decade ► Fund-raising has declined in the United States since 2007. ► 2009 marks the fewest funds raised in 16 years. ► In dollar terms, 2009 was the low point in terms of dollars raised since 1997, with the exception of 2003. ► 2010 is on pace for another annual decline – only US$6.4 billion raised in 33 funds as of 30 June 2010. Source: Dow Jones VentureSource; Ernst & Young Venture Insights

4. US VC funds raised by stage focus Clear shift in dollars toward multi-stage funds as investors seek greater flexibility, growth equity opportunities 501 289 154 91 161 172 166 170 145 76 33 Number of funds closed $83.3 $44.8 $ 19.2 $8.9 $20.7 $27.7 $30.3 $37.1 $26.4 $14.5 $6.4 Amount of funds closed (US$b) Source: Dow Jones VentureSource; Ernst & Young Venture Insights

5. Declining number of VC firms actively investing United States Number of firms making 4 or more investments in year Number of firms making 1-3 investments in year 1338 1240 1122 1053 1040 1018 1013 998 989 885 657 New England Bay Area 750 635 568 546 564 529 546 542 539 473 325 454 377 306 301 340 304 300 302249 236 150 Source: Dow Jones VentureSource; Ernst & Young Venture Insights

6. US VC fundraising: median fund size  Median fund size has grown with shift to multi-stage and growth equity funds  LP flight to quality means that fewer small firms are succeeding in raising new funds Source: Dow Jones VentureSource; Ernst & Young Venture Insights

7. Why the Decline? Entrepreneurs, LPs & GPs got greedy in the late 1990s – VC fund sizes ballooned – Too many VCs = too many marginal companies funded – Fund sizes drove shift to late stage – Exit market dried up in US: 9/11 & 9/08 Returns for the decade were flat, on average BUT, many funds small early stage funds did quite well 7

8. Thesis-Led Approach Finds Winners in Emerging Fields 5-10 years to “big exits”  Need market evolution insight A strong thesis targets leaders in the next wave: – Smart entrepreneurs find investors who “get it” – Faster decisions – More value as board members We sharpen our investment theses over time: – As we explore new markets – As markets and technologies change 8 “I skate to where the puck is going, not to where it has been” Wayne Gretzky NHL Hall of Fame Player “I skate to where the puck is going, not to where it has been” Wayne Gretzky NHL Hall of Fame Player

9. Learning Sharpens Our Thinking 9 Prior Funds NAV III Ad- Tech We learn as we go deeper Markets evolve Old markets grow stale New markets emerge Digital Media Mobile e- Commerce Financial Tech Security Customer- Driven Healthcare Social Media SAAS/ Software

10. Pandora for News/Info Benchmark + NEA > 300,000 Users 600 min/user/mo* Software that enables Android tablets 60m tablets in 2011 Top-5 seller on Amazon 10 Mobile: Info-Tainment Reinvented “Connected Mobile Devices (tablets, smart phones) will transform & disrupt information & entertainment industries.” NAV Companies to Watch *After first month.

11. 11 Technology Wealth Creation / Destruction Cycles New Companies Often Win Big in New Cycles While Incumbents Often Falter Mainframe Computing 1960s Personal Computing 1980s Desktop Internet Computing 1990s Mobile Internet Computing 2000s Mini Computing 1970s New Winners Note: Winners from 1950s to 1980s based on Fortune 500 rankings (revenue-based), desktop Internet winners based on wealth created from 1995 to respective peak market capitalizations. Source: Factset, Fortune, Morgan Stanley Research. Microsoft Cisco Intel Apple Oracle EMC Dell Compaq Google AOL eBay Yahoo! Yahoo! Japan Amazon.com Tencent Alibaba Baidu Rakuten Digital Equipment Data General HP Prime Computervision Wang Labs IBM NCR Control Data Sperry Honeywell Burroughs

12. 12 New Computing Cycle Characteristics Reduce Usage Friction Via Better Processing Power + Improved User Interface + Smaller Form Factor + Lower Prices + Expanded Services = 10x More Devices 1MM+ Units 100MM+ Units 10B+ Units??? 10MM+ Units Increasing Integration Car Electronics GPS, ABS, A/V Mobile Video Home Entertainment Games MP3 Wireless Home Appliances Cell phone / PDA Smartphone Kindle Tablet Computing Growth Drivers Over Time, 1960 – 2020E Note: PC installed base reached 100MM in 1993, cellphone / Internet users reached 1B in 2002 / 2005 respectively; Source: ITU, Mark Lipacis, Morgan Stanley Research. 1B+ Units / Users 1 10 100 1000 10,000 100,000 1,000,000 More than Just Phones iPad

13. 13 Smartphone > PC Shipments Within 2 Years, Global – Implies Very Rapid / Land Grab Evolution of Internet Access Unit Shipments of Desktop PCs + Notebook PCs vs. Smartphones, 2005 – 2013E 2012E: Inflection Point Smartphones > Total PCs Note: Notebook PCs include Netbooks. Source: Katy Huberty, Ehud Gelblum, Morgan Stanley Research. Data and Estimates as of 9/10

14. Mobile Lead Generation $15M+ Revenue RRE, Greenhill Brand messages in Captchas, e.g.: Interaction  retention $15M+ bookings 14 Digital Media: Ad $ Flow to Digital “$50B in advertising will go digital when new companies deliver the measurable results brand managers expect.” NAV Companies to Watch

15. Banner Blindness and Offer Fatigue

16. Media Time Spent vs. Ad Spend Still Out of Whack Internet / Mobile (upside…) vs. Newspaper / Magazine / TV (downside…) Note: Time spent data per NA Technographics (2009), ad spend data per VSS, Internet advertising opportunity assumes online ad spend share matches time spent share, per Yahoo!. Source: Yahoo! Investor Day, 5/10. % of Time Spent in Media vs. % of Advertising Spending, USA 2009 16 ~$50B Global Opportunity

17. High end runway fashion NEA B round $10M run rate after 6 months Daily deals 2.0 Mobile-based Better value for all Strong start in 6 markets 17 e-Commerce 2.0: Complex Becomes Easy “Complex products can be sold online: custom, expensive, and highly-regulated.” NAV Companies to Watch

18. Golden Age of E-commerce More consumers buy online (over 70% of internet users) Cheaper to build e-commerce company New business models create new experiences (Groupon) Better marketing tools (social media, e-mail lists, video) Mobile smartphones

19. Real time audits of corporate Rx bills Recurring Revenue $1M bookings/mo. Generic Rx drugs for less than insurance co-pays $15M+ revenue run rate Growing 40%/quarter 19 Healthcare Services: Patients Become Customers “Unaffordable costs + healthcare reform drive customers to take control of healthcare spending, causing big change.” NAV Companies to Watch

20. The Rise of Health Care Consumerism Consumers seeking lower cost & better care New ways of practicing medicine emerging Profit sanctuaries being destroyed Huge waste becomes opportunity when consumers gain control

21. Encourage Entrepreneurs – Lower tax rates: capital gains – Lower tax rates: stock options – Remove stigma of failure – Locate where partners are Encourage LPs – Relief from Basel 3 & AIFM – Tax advantage to offset illiquidity – Robust secondary markets – Solve the “bite size” problem Build the Ecosystem – Need lots of acquirors – Need lots of business partners – Need big companies to hire from Great training programs Domain expertise – Education system focused on entrepreneurs – Entrepreneur must be seen as a successful career – Pension, health, benefits must follow entrepreneur 21 Policy Conclusions